Deduct Profit Sharing Contributions After Filing Personal Tax Returns

[YankeeFan]

A self-employed individual with a handful of employees adopted a 401(k) profit sharing plan effective January 1, 2014. The plan was timely adopted in December 2014 and only has a discretionary profit sharing feature for the 2014 plan year. The client inadvertently filed his 2014 personal tax return prior to making a profit sharing contribution for 2014 and without taking a deduction on the returns. It's not likely the client will have the ability to make the contribution before April 15, 2015. Can the client still make a contribution for the 2014 plan year and deduct that amount for 2014 and also count the allocations towards the 2014 415 limit? If it's still possible to make a 2014 deductible contribution, will the client need to file an extension for the 2014 personal tax returns to give himself the ability to make the deposit prior to October 15, 2015. I'm not sure it's even possible to file an extension for a return that has already been filed. Of course, the accountant is willing to amend the 2014 personal tax returns to pick up the deduction assuming it's still possible to make a contribution.

[Flyboyjohn]

To be deductible on a 2014 tax return the PS contribution has to be made (deposited) by the due date of the return (including extensions if any). The actual filing date of the tax return is not relevant to the issue of deductibility EXCEPT to the extent it might preclude the "including extensions" extended deadline.

So the following are OK:

1. File tax return claiming deduction 2/15/15, fund 2014 PS on 4/15/15 (original due date).

2. File tax return NOT claiming deduction 2/15/15, fund 2014 PS by 4/15/15, file amended tax return claiming deduction 5/15/15 (or any time within the statute of limitations)

3. File extension on 4/15/15, file tax return claiming deduction 4/16/15, fund 2014 PS 10/15/15.

4. File extension on 4/15/15, file tax return NOT claiming deduction on 5/15/15, fund 2014 PS on 10/15/15, file amended return claiming the deduction on 11/15/15 (or any time within the statute of limitations).

The problem presented in the post is that since the taxpayer already filed a 2014 return the deadline for funding a 2014 PS contribution became 4/15/15, the original due date and the "including extensions" option disappeared.

Accordingly the only solution for this taxpayer is to fund the 2014 contribution by 4/15/15 which the poster indicates is not possible.

[jpod]

The opening post suggests that the individual is an unincorporated Schedule C filer, so that leaves me with this question: Is it a fact that a 1040 filer cannot secure an automatic extension after filing the 1040?

[Kevin C]

How much of a profit sharing contribution was he going to make? It may still be possible to have it be a 2014 allocation even if the 2014 return can't be extended. If it could be deducted in 2015 along with what he intends to do in 2015, it can still be allocated for 2014 as long as it is deposited within 30 days of the due date of the 2014 tax return including extensions. see 1.415©-1(b)(6)(i)(B).

[jpod]

I am not convinced that it is too late to secure an extension. Nothing which I see in the Form 4868 or its instructions suggests that filing the 1040 prevents you from later filing a (timely) 4868 and securing an automatic extension.